I write about the Internet technologies and upstarts that are disrupting advertising and media faster than ever. I'm living this disruption, so I might as well write about it, too. I spent nine years as chief of BusinessWeek's Silicon Valley bureau writing about the leading edge of technology and business, and I continue to do so for a variety of publications. Follow my posts here by clicking the "+ Follow" link under my name. You can also find me at my personal Web site RobHof.com, follow me on Twitter (robhof), Circle me on Google+, subscribe to me on Facebook, and email me (robert.hof@gmail.com).

CEO Tim Armstrong Makes Case (Again) That AOL Is Finally On The Mend

AOL has been the sad sack of online media for so long now that it almost makes Yahoo look good.

But at least the latest quarter showed the first year-over-year revenue growth in eight years–eight!–so it’s worth looking a little more closely at whether CEO Tim Armstrong has a handle on what can bring the Internet pioneer back from irrelevance.

Armstrong, who recently said he sort-of, perhaps, possibly might be interested in buying Time Inc. even though the AOL-Time Warner merger of 13 years ago was widely considered one of the worst in business history, opened the advertising technology conference ad:tech in San Francisco today with a packed keynote address.

His main message, which sounds rather familiar by now: AOL is investing a lot in everything from local content to video to ad technology, and it’s starting (though slowly) to revive the company.

Here’s what else the former Google executive had to say in the keynote and in conversation afterwards with Adam Lashinsky, editor at large for Fortune magazine:

First Armstrong says AOL is announcing a new ad tech platform called Marketplace by AdTech (all in capital letters, but I can’t bring myself to do that). It’s a so-called SSP, for sell (or more commonly supply) side platform, which helps publishers sell ads in an automated fashion. The announcement comes just a few weeks after AOL debuted an advertiser-oriented tech platform, known as a demand side platform, or DSP. Rivals, Google in particular, and software firms such as Adobe and Oracle have been building out their own suite of advertising technology services as more advertising gets done via automated systems.

Armstrong made the case that this automated ad buying and selling, known in the business today as “programmatic” trading, can also fuel creativity in advertising. Many agencies and others in traditional advertising worry that the advent of automated display-ad trading, following Google’s lead on search ads, takes the creativity out of advertising.

Armstrong says the companies that have stayed only in programmatic have not seen their valuations grow. We think there’s a time period now where programmatic is starting to bleed into everything, he says. But he thinks human-driven ad services will actually become increasingly important.

One trend, he says, is that there are many (too many, is the implication) ad tech companies chipping away at the dollars going to publishers.

Second, the connectivity of all these ad tech systems is lacking, and that’s going to change. There’s going to be a compression of all those players that should provide publishers (like, say, AOL) with more than the 45 cents on the dollar of ads that they’re getting now, he says. We want to earn publishers more money, he says.

Another issue for publishers is how they can get access to all the data they need to make the most of their ad inventory. So another important component AOL is working on is how they can get access to all the data in all the systems they use. (Though it should be said, as it was yesterday at another ad tech conference here, that AOL has been seen as mostly AWOL from the ad tech revolution.)

We’re probably at the highest point of opportunity and the lowest point of competition in the online ad business, he says. It’s very hard to delineate what the differentiation is among the various ad and ad tech players.

At the same time, the offline competition for advertising is going down. So in the next five to 10 years, there’s going to be a huge movement of offline ad revenues to online.

One megatrend he foresees is live advertising. Consumer interactions with ad content that’s delivered in almost real time is quite high, he says. Internet and mobile has a chance to be lights-out compared with television, he says.

Another program AOL ran with Unilever was what looks like a content platform called Makers: Women Who Make America, on women’s leadership. Armstrong says the platform, intended to promote Unilever’s Simple line of skin care products, is an example of how AOL is trying to “game-change” the content in advertising.

Lashinsky says Armstrong made a strong case for AOL’s advertising services business, but he notes that Armstrong didn’t talk about AOL’s own content business, Patch–which despite the revenue growth in the recent quarter, has been disappointing. Armstrong says a lot of the strong content people are still not focused on online yet.

Q: Why are you convinced why one company needs to have both content and technology?

Armstrong: Even Google and Facebook are moving in that direction. One of the things that’s most important in people’s lives is content. Look at what Amazon is doing, Google, Microsoft with Xbox (video content).

Q: People would say AOL has done better than they expected but still not good enough. Fair?

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